Investing can seem convoluted and risky before you get started. There is so much information – what are stocks, equities and bonds? Which ‘stocks’ should I invest in? What platform should I use? What do all these little squiggly lines mean? What is the S&P 500? The Dow Jones and the London Stock Exchange? Should I be investing in Bitcoin? And on and on.
I could write a page of questions that left me blank, and the answers, I thought, would be much too complex for my brain to comprehend. I always thought investing was for people with more knowledge than me; people who wore suits and worked on Wall Street.
In addition, when you work as an expat in the Middle East, there isn’t a ‘pension’ or ‘retirement’ system as there is in many Western countries. Instead, they usually offer end of service gratuity – typically companies pay out a month per year of work as a lump sum, or some similar contractual deal. A recipe for potential disaster.
This mix of a negative mindset and a lack of financial literacy landed me an investment in a very bad product – loaded with fees, very expensive. I had no idea – all I knew was that a financial advisor, someone with much more knowledge than me, was looking after my money, investing it in the stock market and essentially, building my pension for me.
Luckily, a few years later, I ‘woke up’ and exited my savings plan, discovered that the stock market is actually not all that scary and you don’t have to be an old white guy in a suit to understand it or invest in it. That being said, you do need some knowledge of how the stock market works, the various indices and funds available, brokerage platforms and fee structures.
But not everyone is all that interested in reading about exchange traded funds and deciding on the correct asset allocation. That’s where Stashaway comes in – confidently and safely invest in the stock market without your returns being eaten away by fees.
What is Stashaway?
Stashaway is a DIFC (Dubai International Finance Centre) and DFSA (Dubai Financial Services Authority) regulated robo-advisor, which means that you put your details in and choose your risk tolerance, then they use sophisticated algorithms to automatically invest and rebalance the money.
Thus, the fees are lower than a financial advisor, whose time you are paying for to manually select the funds and invest your money. However, you will likely find it slightly more expensive than full do-it-yourself, where you pick, invest, and rebalance your portfolio.
Founded in Singapore in 2016, Stashaway now has $1 billion USD in assets under management and people of 174 nationalities living in 145 countries choosing to invest with them. They pride themselves on offering a simple method of growing money with a transparent fee structure – sounds good to me!
How do I create an account?
Creating an account is easy and free – just enter and verify your email and enter a couple of other details. It takes literally minutes to set up an account. Then, you send them a copy of your ID and proof of address (can be a rental contract or bank statement or utility bill). This takes a couple of days to get verified and then you’re ready to invest. I found it to be a straightforward process.
Assessing your risk tolerance
Once you’ve created an account, the next step is to assess your risk tolerance. In ‘General Investing’, you choose whether this is a ‘core’ portfolio (lower risk) or ‘higher risk’ portfolio to begin. Then Stashaway will ask you how much you’re willing to risk, giving you a scale of how likely your portfolio will drop in a year, depending on your risk tolerance.
For example, if you select ‘more conservative’ in core portfolio, there is a 1% chance that your portfolio will lose more than 7.1% in a year, whereas selecting ‘more aggressive’ gives you a 1% chance that your portfolio will lose more than 22% in a year. I like this feature as it prepares investors for the downturns ahead of time, and the ‘losses’ (although they aren’t real losses unless you sell) are what worry a lot of people.
Different types of portfolios
I love this feature of Stashaway! You can choose between ‘General Investing’, ‘Goal-Based Investing’ and ‘Simple’ portfolios. The ‘General Investing’ option is what I discussed in the previous section – you have either a core portfolio or higher risk portfolio option, you select the risk, and you can then see a sample below of the sectors in which your money will be invested, for example, government bonds, commodities and equities. There is an option to click on each one to read a definition as well as name your portfolio.
Another portfolio type that Stashaway offers is ‘Goal-Based Investing’. There are typical goals people might have such as retirement, wedding, new vehicle etc. For each goal, there are specific questions to guide you on how much you need to save per month. Alternatively, if you want to save for a goal and bypass the specific questions, you can click on ‘I already know how much I need’ and just enter your total amount and the time you have to achieve it. Stashaway will then calculate what you need to save per month to achieve it.
Finally, with ‘Stashaway Simple’, you can save money with an average 1.2% return per year with no minimum or maximum balance and no management fee. It’s not going to beat inflation, but you can treat this like a savings account for short term goals or your sinking funds/ emergency fund if you wish, as it bears very little risk. It invests your money in a Sharia compliant money market fund, so it beats most savings accounts in banks, but has little risk.
Transferring money
One of the best features of Stashaway is that the stress and hassle of transfer fees are eliminated. The funds are invested in US dollars, but you can transfer AED from your bank to their local bank so just pay the cost of a local transfer (maybe 1-2 dirhams). The FX rate charged is 0.08% on the spot rate. You can view your investments and transactions in $US and AED.
I transferred 2000aed in January 2022 and after the conversion, received $544.07. To compare with xe.com, 2000aed is converted into $544.58. This is an excellent transfer rate and allows you to invest smaller amounts more regularly (every paycheck if you wish) and of course you have the option of transferring directly in USD to avoid the fees.
With DIY platforms such as Interactive Brokers, you can also transfer small amounts if you wish, but you will likely pay higher transfer fees with the use of an intermediary bank. Hence why people usually wait until they have $5000 or more before making international transfers to reduce the fees.
Investing the funds
Once you’ve transferred the money, Stashaway will invest it for you in a couple of working days. You can then click on overview, assets, projections and about portfolio to learn about exactly what has been invested in and how each sector is performing. Stashaway’s robots will automatically rebalance for you if the markets skew your portfolio to too much or too little risk exposure.
You can click on each asset class and fund to read about it at length if you wish. Your portfolio, although domiciled in the US, is globally diversified and you will be invested across a number of sectors and fund types. Any dividends you get paid are automatically reinvested for you and will appear on your ‘transactions’ tab.
Fees vs service
So, the question on most people’s minds will be: how much does all this cost me? It is free of charge to set up and close your account, plus to make withdrawals and transfer money between your portfolios.
The annual fee of the general and goal-based portfolios is between 0.2-0.8%, and the bigger your portfolio, the lower your fee (all the more incentive to get more money invested!). For example, the first $25,000 is charged at 0.8% and portfolios over $1 million are charged at 0.2%.
There is also the 0.08% conversion rate if you transfer money in AED, but of course you have the option of transferring directly in USD to avoid that cost. For the Stashaway Simple account, there is a 0.38% fee, which is embedded in the 1.2% projected return. Plus, if you sign up using my link you will get your first 6 months of investing for free!
The service is excellent – the FAQs and blogs are informative and straightforward, designed for the everyday person who isn’t an investing expert and every time I’ve contacted them with a question, they are quick to respond and extremely helpful.
Overall, for the service you get, this is an excellent service in my opinion. I even got a little reassuring message which popped up when I logged into my account when the markets had gone through a downturn.
How do I know my money is safe?
Another question people often ask is: what if Stashaway go bust? Will I lose all my money? My retirement – oh my days, I couldn’t even imagine! I want to preface this section by reminding you that nothing is ever 100% guaranteed – your high street bank could go bust and even if you keep your money under your mattress, it could be damaged and will definitely be being slowly devoured by inflation!
Having said that, Stashaway have put measures in place to protect your money in the most stringent way possible. In terms of the website, they have high levels of security in place and 2 factor authentication required, as well as notifying you of any transactions on your account.
Your money is kept separate from Stashaway’s money – they keep their investors’ money in a trust or custodian account that they can’t touch. For General Investing and Goal-based portfolios, your deposits first go to a Citibank UAE trust account. Then, your purchased securities go to a custodian account through Saxo Capital Markets. For StashAway Simple™, State Street Custodial Services (Jersey) Limited holds your funds.
Additionally, Stashaway is regulated by the Dubai Financial Services Authority, which monitors its business and ensures that Stashway complies with laws and policies. It protects the customer from fraud, dishonesty or misconduct from any financial services provider – click here to read more.
If you have been wanting to start saving for retirement, but not sure where to start, Stashaway could be just the ticket. The platform is super easy to navigate, you can invest at your risk tolerance with low fees and withdraw your money at any time. Plus, what’s even better is that they’ve recently introduced ESG (environmental, social and governance) and environmental portfolios to their app so you can invest in ethically sustainable companies that you want to see grow.
Good luck on your investing journey and congratulations for taking the leap.
Do post any further questions below and I am going to keep adding to this blog post as the year goes on to keep you updated about my Stashaway experience – don’t forget to follow on Instagram for all the updates.
However, I am not a certified financial advisor, and you should always do your own research and due diligence. I hope this article has given you food for thought, but all information is based on my own research, experience and opinions so I cannot take accountability or responsibility for your decisions.
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